Riot police fired tear gas at economic protesters in the historic Grand Bazaar in Tehran this week. Iranian President Mahmoud Ahmadinejad blamed Western sanctions for his country's economic woes as the rial collapsed this week.
State Department spokeswoman Victoria Nuland said Washington was watching the situation in Tehran very carefully. The Iranian government, she said, bears responsibility for decisions impacting the lives of ordinary Iranians.
"The Iranian state has horribly mismanaged all aspects of their internal situation but certainly the economy and certainly their reaction to the run on the rial," she said.
Western sanctions targeting Iran's energy sector were in response to transparency issues surrounding a nuclear program Tehran says is for peaceful purposes. Ahmadinejad expressed some degree of willingness to move closer to Washington after U.S. presidential elections next month.
"If they change course, then we're prepared to match steps with steps," said Nuland. "But this pressure is real because our concern is very real and we're not going to allow Iran to have a nuclear weapon."
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